The Law Offices of A. Lavar Taylor Offer Thoughts on U.S. v. Boyd - Potential Implications for U.S. Taxpayers Residing in the U.S. and Throughout the World

October 7, 2020

May the IRS charge a $10,000 penalty for each foreign bank account that a person is required to list on a Foreign Bank Account Report (“FBAR”) when a person required to file that FBAR fails to file the FBAR on time and their late filing is unintentional? Or is the IRS limited to charging a single $10,000 penalty in that situation, even where the person has many different, foreign financial accounts that were required to be listed on the FBAR? This is the precise question to be decided by the Ninth Circuit Court of Appeals in the appeal of U.S. v. Jane Boyd. The outcome of this appeal will affect many taxpayers who previously failed to comply with their offshore reporting requirements.

A U.S. taxpayer must file an annual FBAR if the taxpayer has a financial interest in (or signature or other authority over) a foreign financial account, and the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the year. The FBAR is filed with the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of Treasury. A taxpayer with an FBAR filing requirement must timely file their FBAR and report certain information on the FBAR, which in many cases includes listing various account information and the balance in those account(s). The code section at issue in this case, 31 U.S.C. § 5321, provides that a penalty of $10,000 applies when a taxpayer fails to timely file an FBAR.

In U.S. v. Boyd, the taxpayer, Ms. Boyd, filed a delinquent FBAR on which she correctly reported all of her foreign bank accounts. The government acknowledged that Ms. Boyd’s failure to timely file her FBAR was non-willful, meaning the IRS acknowledged that Ms. Boyd’s failure to file the FBAR on time was unintentional and she was unaware that she had to file an FBAR at the time the FBAR was originally due. The government agreed to only assess Ms. Boyd for one year of non-compliance. However, despite recognizing her failure to timely file the FBAR was unintentional, the IRS assessed Ms. Boyd with a penalty of nearly $50,000 for failing to file a timely FBAR for the one year, simply because she had multiple overseas accounts.

The IRS, and in turn the Department of Justice (“DOJ”), is taking the position that the $10,000 penalty applies on a “per account” basis. The Law Offices of A. Lavar Taylor appealed the District Court’s decision in this case to the 9th Circuit Court of Appeals, and the matter is set for oral arguments on September 1, 2020. The Firm has argued that there is no support for the position taken by the IRS and DOJ. Recognizing the importance of this case to other U.S. taxpayers, residing both in the U.S. and throughout the world, Ms. Boyd decided to be a test case on this issue.

A. Lavar Taylor, Attorney and Founder of the Law Offices of A. Lavar Taylor, LLP (http://www.Taylorlaw.com), is widely recognized as an authority in civil and criminal tax controversy law. Mr. Taylor has been named as one of "The Best Lawyers in America" and is a frequent speaker at tax and bankruptcy seminars.

Author: A. Lavar Taylor, Managing Partner